33rd Phavisminda.karl Marx's Social Formation - r.y. Rivera

SILLIMAN UNIVERSITY

KARL MARX’S SOCIAL FORMATION:

Philippine Social Formation, Financial Crisis and Mass-Hunger

REYNALDO Y. RIVERA, Ph.D.

5/28/2010

For the 33rd PHAVISMINDA INTERNATIONAL CONFERENCE ON CRITICAL THEORY, on May 27-29, 2010 at South Sea Resort & Hotel, Bantayan, Dumaguete City, Philippines.

Reynaldo Y. Rivera, Ph.D. 2 | P a g e

KARL MARX‟S SOCIAL FORMATION:

Philippine Social Formation, Financial Crisis and Mass-Hunger Reynaldo Y. Rivera, Ph.D.

(For the 33rd PHAVISMINDA INTERNATIONAL CONFERENCE ON CRITICAL THEORY) May 27-29, 2010

Silliman University, Dumaguete City, Philippines

In this paper, I assert that there is a notable increasing „‟pauperization”

among the Filipinos, as wealth is apparently more and more concentrated in the

hands of a few local and overseas wealthy business owners in the Philippines. In this

instance, while many Filipino Scholars still diagnose the character of the Philippine

economy as “semi-feudal,” its mode of production is already fashioned in the

capitalist exchange between the workers and the owners of capital through the

payment of wages. Given the inherent tendency of the capitalist production to

accumulate and concentrate wealth, its productive forces push the economy to

overproduce which “cannot find a buyer” (Ernst Fischer, Pelican, 1973: 112); and

thus create a crisis. My assertion is anchored on Marx‟s Law of uneven development

which is well established in his “Historical Tendency of Capitalist Accumulation.”

Marx wrote:

Along with the constantly diminishing number of the magnates of

capital, who usurp and monopolize all advantages of this

(capitalist)process of transformation, grows the mass of misery,

oppression, slavery, degradation, (and), exploitation; but with this

too grows the revolt of the working class, a class always increasing

in numbers…. [see Karl Marx and Frederick Engels in One Volume,

Moscow: Progress Publishers, 1968: 233-234).

Please allow me to point out here however, that the revolutionary tactics of

the working class may no longer be carried out by the force of violence but by

parliamentary struggle. Marx changed his view of effecting the transition and spoke

of placing the hope of the workers in a peaceful parliamentary struggle in Amsterdam

in 1872 when he said:

We know how special regard must be paid to the institutions,

customs, and traditions of various lands; and we do not deny that

there are certain countries, such as the United States and England

in which the workers may hope to achieve their ends by peaceful

means (Paul Sweezy in Leo Huberman and Paul Sweezy, 1968:83).


This advocacy for peace is presented to disabuse the minds of many people

who believe that Marx is an advocate of violence rather than for peace.

Although admittedly many critics claim that Marx‟s prediction of wealth and

mass hunger polarization in his general theory of capitalist accumulation has never

occurred in modern-day advanced capitalist economies and thus proved him wrong

(M. Barrat-Brown in T. Shanin, 1976); but which, in his time, (was) a well founded

assumption” (Ernst Fisher, 1973:115), Marx‟s vision about labor condition still is

correct if seen in the context of a globalized economy. In fact, trade unions in the

advanced capitalist nations successfully played an important role in raising the share

of the surplus-value so that the workers of these countries enjoy a very good living

condition compared to the living condition of the workers in the colonized countries.

But what is not recognized by these critics is that the prosperous living standards of

the workers in the capitalist countries are a function of labor exploitation that

“pauperized” the workers in the colonized economies. Ernst Fischer has offered this

brilliant observation on the correctness of Marx Theory of capitalist accumulation.

Fischer observes, “… in the global sense his broad historical vision proved correct

when he pointed out that in assessing the situation of workers it was necessary to

consider the world market as a whole, and that the wages of some could rise only

because others were starving” (Ernst Fischer, 1973: 124). This thesis is shared by

dependency theorists who argue that “Marx‟s law of uneven development and

pauperization may have been wrong for the core nations, it is correct for the world as

a whole and for the peripheral nations in particular”(see Christopher Chase-Dunn,

1975:720; Theotonio dos Santos, 1970; Gunnar Myrdal, 1957).


Furthermore, many critics of Marx again prove him wrong; they argue that the

predicted economic crisis which could transport the capitalist economy into a

socialist transformation has never actually taken place. They are correct because

Marx neither really anticipated nor factored in the development of capitalist state

regulations, such as the famous Keynesian fiscal and monetary policies, that have

been efficiently used to “pump-prime” the economy through state budget deficits and

financing gap mechanisms in order to moderate the threats of the economic cycles

from transforming capitalism into what Marx calls its inevitable collapse towards the

next stage of development.

Regardless of the arguments thus presented the “inner contradiction of the

capitalist mode of production” which Marx analyzed remains real and “political crisis

are indeed more and more catastrophic” (Ernst Fischer, 116); the apparent signs of

pauperization are sharpening the inner contradiction of the capitalist mode of

production in the “imperialized” countries, as Alejandro Lichauco (1974) puts it. In

the Philippines, according to Alejandro Lichauco, “mass hunger and fiscal-debt crisis”

are evidently and deeply felt among 80 percent of the Filipino households (Lichauco,

Today, March 27-29, 2004). Those manifestations of the inner deep contradiction of

the capitalist mode of production proves the validity of Marx‟s general theory of

Social System found in his “Preface to A Contribution to the Critique of Political

Economy,” which is then a relevant theoretical horizon for this study.

My paper will focus on the analysis of Marx‟s General Theory of Social System

and use it as the context of analyzing the Philippine social formation, Financial Crisis

and mass-hunger. The historical analysis of the Philippine Social Formation is never

the intention of this paper, so that Marx‟s General Theory of Social Formation or


Social System is only used to provide both the empirical criterion of relevance for

factual generation and analytical integrative function of the many fragments of reality

into a coherent body of knowledge in the sense of Heraclitus‟ Hen Panta (All

Knowledge is one).

What then is the nature of Marx‟s Social Formation and what is his scientific

method of interpretation?

MARX‟S SOCIAL FORMATION AND SCIENTIFIC METHOD

The nature of Marx‟s general theory of social formation may be well

appreciated by first understanding his method of science. The general theory offers

an intellectual perspective or horizon while his method provides how the perspective

may be effected in terms of a transcendent thinking that goes beyond the

appearance of the visible relations.

The Science of Marx

In his essay, “Why Socialism?,” Albert Einstein claims that on the surface

there is no “methodological differences” between the hard sciences and the social

sciences, for both clusters of disciplines “attempt to discover laws of general

acceptability for a circumscribed group of phenomena in order to make the

interconnection of these phenomena as clearly understandable as possible.” (Albert

Einstein, 1949 as published in Leo Huberman and Paul Sweezy, 1968). However,

Einstein points out that methodological differences do really exist between the two.

In the social sciences or in the “soft” social sciences such as economics the

“discovery of general laws are difficult by the circumstance that observed economic


phenomena are often affected by many factors (such as conquest stealing the lands

of the colonized) which are very hard to evaluate separately” (Ibid).

It is even more difficult a discipline because the whole enterprise, as Marx

does, seeks the hidden structures beyond their appearance, just like what quantum

physicist David Bohm did in locating the “implicate order” that transcends beyond

the appearance of the “explicate order” of a phenomenon. (David Bohm and David

Peats, 1986).

Such an intellectual enterprise needs a brilliant mind whose eye can

penetrate beyond the opaque “visible relations” of the Capitalist mode of production.

And this brilliant mind is Karl Marx‟s mind himself whose mode of thought overcome

the arbitrary tenets of the classical economics: it demands a distinction between that

which shows in the physical appearance of things and their essence that recurs

underneath the visible appearance of human relations. In his Capital, book III, vol. III,

Marx demands the recognition of the distinction between what we see and what we

do not see of things. Marx‟s said, “Science would be superfluous if there were no

difference between the appearance of things and their essence” (see also Maurice

Godelier in M. Lane, ed., 1978:341). In this formulation, Marx‟s admonishes us not

to be misled by the physical structures that appear before our senses, because there

are more things to discover and to learn behind what we see of phenomenon through

our naked eye. In fact, Marx‟s scientific construction is obedient to the tenets of the

Scriptures, as in I Sam. 16: 7 (RSV) that speaks: “Do not look on his appearance or

on the height of his stature, because I have rejected him; for the Lord sees not as

man sees; man looks on the outward appearance, but the Lord looks on the heart.”

Thus for Marx, in faithful obedience to this Scripture, any scientific thinking of a


phenomenon must take the path of the Lord‟s thinking which looks into the heart of a

thing in regard to its essence. Marx then is also a fundamental ontological

philosopher in the sense of Martin Heidegger who seeks nothing beyond forms.

Marx further suggests that since scientific analysis and testing in the social

sciences cannot be done by either a microscope or a chemical re-agent, social

scientists and philosophers have to depend on what Marx calls the “force of

abstraction (and) replace both” (Karl Marx in “Preface to the First German Edition of

the First Volume of Capital,” Karl Marx and Frederick Engels in One Volume, 1968:

228). As a scientist Marx is never dogmatic and, in fact, fascinated by the wealth of

facts in the British Museum; he was “determined… to begin afresh from the very

beginning and to work through the new material critically (Karl Marx, “Preface to the

Critique…,” 1968:183). He was then to recast his theoretical scaffolding in his

Grundrisse which provided “the ground plan of The Critique of Political Economy (see

Michael Barrat Brown, in T. Shanin, ed., 1972: 129). The point here is that Marx‟s

Method of Scientific Investigation resorts to the use of “the force application of

abstraction;” the starting point of his analysis is the commodity of use value and for

exchange in the market place. M. Barrat Brown explains Marx‟s Method of science in

this manner:

Marx‟s method of presentation, however, was to proceed from the

abstract to the concrete. Thus, at every stage in Capital the

analysis is presented in its bare essentials and then clothed with

factual material; and the first and most difficult theoretical chapters

of Capital precede the exposition in the last hundred pages of

Volume I.

Marx‟s abstraction neither takes the logical positivistic/pragmatic deductive

method where “theory is used to explain real-world events” nor uses theory as guide

to data-collection for theoretical validation. Also, Marx never thought of deductive


method as a science that “links between the theory and (his) observation” (Manheim

and Rich, 1981:19). For Marx, “a scientific investigation of the Capitalist system

consists in discovering the hidden internal structure beneath its (i.e. social formation)

visible functioning” (Maurice Godelier in Michael Lane, ed., 1978:341) rather than

studying only on what can be “measured” for “precise description of an object‟ or a

thing.” (Manheim and Rich, 1981:19). Marx‟s scientific method (which is widely

shared by the Scriptures; by quantum Physicist Werner Heisenberg, 2000; by

quantum physicists David Bohm and David Peat, 1986, by Goethe, 1993; by Martin

Heidegger, 1986 and other essays) distinguishes Marx from other sociologists,

historians, and economists. Marx‟s scientific method then is a powerful abstraction

designed primarily to uncover “nothing” behind the visible social relations. Hence,

Marx‟s method of science should be understood as a complimentary tool of his

“general theory” of social system, a social system which refers to what Marx calls the

“bourgeois economics” in his “Preface to A Contribution to the Critique of Political

Economy” (K. Marx and F. Engels, 1968: 180; M.B. Brown, 1972:123)

The General Theory of Marx

Marx‟s interest in “examin(ing) the system of bourgeois economics” indicates

that his general theory of social system embodies the many layers of the capitalist

system (M.B. Brown in T. Shanin, 1972: 123). These structures themselves

differentiate “in broad outlines Asiatic, ancient, feudal, and bourgeois Modes of

production” (that) can be designated as progressive epoch in the economic formation

of society” (Marx, “Preface to A Contribution…,” 1968: 182). In each of this epoch is

an experience of a sharp contradiction for which the task of resolution is found in the


material conditions of social life. For our appreciation, let me quote what Marx calls

his “guiding thread of study” — a guide which is concisely written in very tight

schema!

In the social production of their life, men enter into definite relation

that are indispensable and independent of their will, relations of

production which correspond to a definite stage of development of

their material productive forces. The sum total of these relations of

production constitutes the economic structure of society, the real

foundation, on which rises a legal and political superstructure and

to which correspond definite forms of social consciousness. The

mode of production of material life conditions the social, political

and intellectual life process in general. It is not the consciousness

of men that determines their being, but, on the contrary, their social

being that determines their consciousness (Karl Marx, Preface to

The Critique of Political Economy, 1968: 181).

The quoted passage which embodies the social life of Marx general theory

presents two irreducible structures on which the upper structure depends on the

base structure of the system for its continued existence. Marx‟s notion of social life

comprises two structures: “the economic structure of society” and the “legal and

political Superstructure.” The economic structure is designated as “the real

foundation” of society on which the “Superstructure” stands firm. “Corresponding” to

the development of the economic base are a “definite forms of social

consciousness,” which in turn, shape or influence the economic structure at the base

of society.

Many scholars interpret the term “correspond” to mean a deterministic

mechanical act that suggests a “unilinear” direction of the theory where awareness

of the workers is taken as a determined act of the economic base. To interpret this

term in deterministic-linguistic form will distort Marx‟s theoretical intention of a “play”

between the economic base and the Superstructure of ideological forms. For Marx,

“relations of production” are “legal expressions” of the economic base, so that Marx


is suggesting that the Superstructure of law and state apparatuses also influence the

activities that are going on in the economic base; but for him the economic base

ultimately asserts. Frederick Engels reinforces Marx‟s advice to everyone to examine

materially all ideas and institutions from where these arise, and warned against

transforming their materialist “proposition into a meaningless, abstract, senseless

phrase” (Engels‟ Letter to Bloch, dated September 21-22, 1890). Engels wrote

Bloch about Marx and his materialist Proposition on September 21-22, 1890:

… According to the materialist conception of history, the ultimately

determining element in history is the production and reproduction

of real life. More than this neither Marx nor I have asserted. Hence

if somebody twists this into saying that the economic element is the

only determining one, he transforms that proposition into a

meaningless, abstract, senseless phrase. The economic situation is

the basis, but the various elements of the superstructure… also

exercise their influence upon the course of the historical struggles

and in many cases preponderates in determining their form (w.o.

Henderson, ed. Engels: Selected Writings, 1967:333; emphasis by

Engels).

For Engels, as for Marx, the Superstructure of “political forms of the class

struggle and its result” such as “the reflexes of all those actual struggles in the brains

of the participants, political, juristic, philosophical theories, religious views and their

further development into systems of dogmas…” exert influence and in many

instances determine the “form” of the historical life; but, Engels and Marx maintain

that the economic structure “ultimately is decisive” (Ibid). Thus, Karl Marx in the

same “Preface to A Contribution to the Critique of Political Economy” — argues of the

transformation of the whole Superstructure with the “change in the economic

foundation” of the social formation:

At a certain stage of their development, the material productive

forces of society come into conflict with the existing relations of

production or — what is but a legal expression for the same thing ―

with the properly relations within which they have at work hitherto.

From forms of development of the productive forces these relations

turn into their fetters. Then begins an epoch of social revolution.


With the change in the economic foundation the entire immense

superstructure is more or less transformed [Karl Marx and Engels in

one volume, 1968; 181-182].

Marx clarifies that change in the economic base begins when “the material

productive forces of society come into conflict with the existing relations of

production.” The progressive development of the tools of production turns these

relations into their fetters and “an epoch of social revolution” burst into a sharp

break. With the change of the economic base the whole Superstructure of political

as well as ideological forms are transformed and a new social formation is formed.

Thus, the “playfulness” of the term “correspondence” clarifies that Marx entertains a

no unilinear materialist conception of history.

As a concretely grounded philosophy then Marx has reversed the egoistic

Cartesian “cogito, ergo sum — I think, therefore I am” into the path of Nietzsche‟s

materialist scientific guide, “vivo, cogito ergo ― I live, I am ― therefore I think” (Kurt

Reinhardt, 1964:80). For Marx then “The mode of production of material life

conditions the social, political and intellectual life process in general.” In scientific

analysis “It is not the consciousness of men that determines their being, but, on the

contrary, their social being that determines their consciousness.” Marx‟s method of

science depends on the concrete, historical material life, or the real life condition of

people; that the basis of a true scientific studies as well as the ground of the

reproduction of knowledge and ideas is the concrete material life rather than the

search of knowledge based on what one thinks of a reality.

If, as Marx emphatically claims, that the material conditions determine

consciousness, how is it possible for one to transcend into nothing behind the


phenomena and thus be liberated from the material constraints of his model? Marx

provides his answer:

In considering (the) transformations [of the immense

superstructure] a distinction should always be made between the

material transformation of the economic conditions of production,

which can be determined with the precision of natural science, and

the legal, political, religious, aesthetic or philosophic — in short,

ideological forms in which men become conscious of this conflict

and fight it out. Just as our opinion of an individual is not based on

what he thinks of himself, so can we not judge of such a period of

transformation by its own consciousness; on the contrary, this

consciousness must be explained rather from the contradictions of

material life, from the existing conflict between the social

productive forces and the relations of production (Karl Marx, 1968:

181-182).

As to when a social formation burst into the graveyard of history, Marx

however, provides two conditions before such change could happen towards the

resolution of an existing contradiction: “No social order ever perishes before all the

productive forces for which there is room in it have developed; and no, higher

relations of production never appear before the material conditions of their existence

have matured in the womb of the old society itself” (Karl Marx, “Preface to A

Contribution to the Critique…,” 1968:182). As a scientist himself, Marx‟s science is

the application of the Darwinian adaptation principle and a Newtonian Physics. Let

me share with you this brilliant observation by Michael Barrat Brown:

In his general theory, Marx seems to be reflecting Darwin‟s thought.

Just as species cannot survive unless adapted to their environment,

so societies cannot develop without adapting the relations of

production to the forces of production. In his model of the

economic structure Marx seems to be following the Newtonian

concepts. Xxx „In the form of society now under consideration, the

behavior of men in the social process of production is purely

atomic.‟ „As heavenly bodies, once thrown into a certain definite

motion, always repeat this, so it is with social production (M.B.

Brown, 1972: 127).

We are certain that the validity of Marx scientific theory rests on the fact that

his scientific principles are well founded in well known theories in Biology, Newtonian


physics and quantum dynamics — a validity which assures us of its universal

application when used to analyze and to understand the Philippine social formation

in terms of the “infrastructure” and the Superstructure.”

The Superstructure

Grounded on the wealth of historical records in the British Museum, the main

points of Marx in his concisely written general schema are converging on the

economic base on which the State Apparatuses — as Louis Althuser describes them

— arise, and which, in turn, exert influence on the form of activities happening in the

economic base. For Engels, the elements of the state apparatuses constitute the

“political forms of the class struggle and its results.” (W.O. Henderson, 1967:333).

These results embody the various “constitutions” the “juridical forms,” “the reflexes

of all these actual struggles in the brains of the participants,” “philosophic theories,”

“religious views,” and “systems of dogmas” (W.O. Henderson, 1967: 333). Recall

again that all those political and Ideological forms are instruments available at the

disposal of the ruling capitalist class intended to contain, if not eliminate, potential

and real conflicts that threaten the continued existence of the economic base.

Overwhelmed by both the persuasive and coercive state apparatuses of the

Superstructure, the poor worker neither has the strength to repeal nor has the power

to overturn them, unless they organize themselves into a direct and indirect

countervailing force. The attack on the helpless poor workers and job-seekers is

ensured by what Leo Huberman calls “the class that ruled economically (who) “also

ruled politically” (Huberman, 1950; 91). In the U.S., for example, President Wilson

writes in his book, The New Freedom (1913: 57) that “the masters of the


Government… are the combined capitalists and manufacturers of the United States”

(see also Leo Huberman, 1950: 91). Putting it in question form, an American

minister and Congressman — Samuel C. Allen — bitingly asserts of what he sees of

the constitution of the Superstructure of American government: “‟What have

governments been, and what are they now, but the combinations of the rich and the

powerful to increase their riches and extend their power?‟” (see Leo Huberman,

1950:87-88). Then Allen concludes: “‟It is in the nature of things that government

will always adapt its policy, be theory of its constitution what it may, to the interests

and aims of the predominating class.” (Huberman, 1950:88).

Another American thinker, a sociologist, hurled the same observation and

conclusion about the American government in his The Power Elite (1956), C.W. Mills

shows that the American government is effectively controlled by the three thin layers

of elites — Key members of the executive branch, top corporate officials and top

brass in the military — who make major decisions and enforce them through their

“intermediaries.” By virtue of their distinctive and common interest they conspire to

write those laws that influence the everyday life of the American people (see also J.

Victor Baldridge, 1975: 263-64). The tremendous power that this ruling class

maintains in their possession is clustered in the superstructure of “Ideological State

Apparatus” (ISA) and the “Repressive State Apparatus”(RSA) (Louis Althuser,

1971:143; 148-150). The ISA constitutes the religious, the public and private

education, the family, the legal, the political systems and political parties, trade-

unions, the press, radio, television and digital communication channels as well as the

cultural ISA like Literature, the Arts, sports, etc. (Althuser, 1971: 143). All these

elements contribute to the reproduction of what Marx “calls relations of production”


or what Althuser calls “relations of exploitation” in capitalist social formation. The ISA

differs from the Repressive State Apparatus (RSA) in content and domination.

The RSA constitutes a unified public domain which functions “‟by violence‟”

and by ideological or by persuasion (Althuser, 1971:143-148). It is a dominant force

of state apparatuses such as the government itself, the courts, the laws, the police,

the entire defense system and the prison cells; they impose physical violence on the

working class for the continued reproduction of “relations of exploitation.” Hence for

Marx the state apparatus is a “ „machine‟ of repression, which enables the ruling

classes… to ensure the domination over the working class, thus enabling the former

to subject the latter to the process of surplus-value extortion (i.e., to Capitalist

exploitation)” (Althuser, 1971: 137). As a force of violence, Marx sees the state

apparatus as the organ of domination and of oppression of the state over another

class. Lenin, citing Marx, explains the RSA in this manner: “According to Marx, the

state is an organ of class domination, an organ of oppression of one class by

another; its aim is the creation of „order‟ which legalizes and perpetuates this

oppression by moderating the collisions between the classes” (Lenin, 1943:9). Even

the acknowledged father of capitalism admits of governments as the guardian of

property rights against those who do not own the productive forces of production.

Adam Smith writes:

Civil government, so far as it is instituted for the security of

property, is in reality instituted for the defense of the rich against

the poor, or of those who have some property against those who

have none at all.

In the same fashion as Adam Smith, Marx has demonstrated that Civil

government or the whole edifice of the superstructure are intended to preserve the

property relations in the whole mode of production in favor of the capitalist class.


The Mode of Production

For Marx, any capitalist system must engage in the production and

distribution of goods and services. For the capitalist system to perform this twin

economic functions, it must have tools of production or the productive forces such as

land, machines, raw materials, factories, transport system, digital or IT data-system

and other tools of production; it must possess the competence and character to

manage the distribution functions and channels of distribution through its outlets in

the market place. The means of production and labor relations in regard to the

production process comprise what Marx calls the “Mode of Production of material life

(that) conditions the social, political and intellectual life process in general” (Karl

Marx, “Preface to A Contribution…,” 1968:181).

In the “Preface,” Marx asserts that the productive forces must “correspond to”

to the relations of production, for the failure of the relations of production to conform

to the state of development of the productive forces will result in a sharp

contradiction. For Marx, it is these relations of production that determine the “class”

position or the “class” status of people in society. If one is the owner of the means of

production, then he/she is the capitalist who belongs to the “bourgeois” class, or if

one is the non-owner, then s/he is the worker who belongs of the “proletarian class.”

Those two classes are in perpetual conflict in the economic base over the question of

wage and surplus value. For Marx then the term class must be understood in regard

to the relations of production rather than in terms of the Parsonian income

categories. Thus, Marx provides two simple formulas for the capitalist class and for

the working class:


1. The labourer must sell his labour or some other commodity to get Money to

buy Commodities with which to live, i.e., C-M-C.

2. The capitalist uses his money to buy commodities, including labour to make

more money, i.e. M-C-M (see Michael Barrat Brown, 1972: 130).

Because the Capitalist is driven by the desire to sell or make a profit, s/he

tends to expand his/her market and reduce cost by the effective application of

modern technology, overtime arrangement, and improvising on the productive

capacity of labor. The capitalist can neither reduce the wage of the workers nor can

he sell at higher prices, or both workers and buyers will leave his business. Brown

summarizes some important points in regard to the capitalist drive for a sustained

profit over a long period of time:

Each capitalist must make sure that his products sell and sell at a

profit. Each will try to widen his market and reduce his costs. Xxx

what he cannot do in a competitive system is to pass on his losses,

by raising prices as a merchant may, or by lowering his payments to

labour beyond a certain point or he will loss his customers in the

first case and his labour in the second. He is thus driven to reduce

cost by improving his machinery and widening the market for his

product (M.B. Brown, 1972: 130).

Driven by his desire to maximize profit beyond the regulated minimum wage

scheme, Marx identified two important mechanism to improve surplus value in Book

1 of Capital: (a) “absolute surplus value (which is obtained by an increase in working

hours, without a corresponding increase in wages) and (b) relative surplus value

which is obtained by a decrease in the cost of upkeep of the workers brought about

by an increase in the productivity of labour in those branches of industry which

produce the means of subsistence for the worker and his family” (Maurice Godelier,

1978: 348 emphasis mine). The first surplus value expansion is also obtained by

“sub-contracting” a labour agency to skirt welfare benefits and other leave and


economic privileges that go with maintaining a regular employee. The second

approach to surplus value reproduction is obtained by “investing for the future” in

what Kaplan and Norton (1996:127-146) calls the “three categories for the learning

and growth perspective: employee capabilities, information systems capabilities, and

motivation, empowerment, and alignment” because these are the perceived

strategies of the capitalist to “deliver the desired long-term economic performance.”

But how is the “production of surplus value” or the “unpaid labour” determined?

Production of Surplus Value

For Marx, Capitalist and government conspire in making the people believe

that workers are paid by wages as the price of labour rendered in the production of a

commodity, whereas profit is a product of the money they invested in production.

Marx calls this a conspiracy in the reproduction of “false appearance.” Marcuse calls

this the reproduction of “false reality.” For Marx, both wages and surplus value are

“the value of the labouring power (that) is determined by the quantity of labour

necessary to maintain or reproduce it, but the use of that labouring power is only

limited by the active energies and physical strength of the labourer” (Karl Marx,

“Wages, Price, and Profit,” 1968: 209). Wage then is the value of labour spent in the

production of a commodity but which is realized in the first six hours of the 12-hour-

day of work while surplus value is the unpaid labour that goes to profit for the

capitalist; this surplus labour is realized for working in the second half of the twelve-

hour-day of work. Wage is the price that is paid to labour expressed in money,

equivalent to 50 percent of the 12 hours day of work (Ibid).


One single dogma in capitalism is that “The prices of commodities are

determined or regulated by wages.” For Marx, wage is the price of labour; hence,

prices are “formed first by wages.” Since wage is the price paid for the price of

labour, then, as Marx points out, “the prices of commodities are regulated by the

price of labour” (Marx, “Wages, Price, and Profit,” 1968: 199). Marx maintains that

as price is an exchangeable value expressed in money, “‟then value of commodity is

determined by the value of labour,‟ or that “ „the value of labour is the general

measure of value‟.” The question is how is the value of labour determined? For

Marx, “… the value of labouring power is determined by the value of the necessaries

required to produce, develop, maintain, and perpetuate the labouring power.” For

example, Marx holds that if “the average amount of the daily necessaries of a

labouring man require six hours of average labour for their production,” and if he is

paid 3s for “six hours of average labour to realize a quantity of gold,” then “3s would

be the price or the monetary expression of the Daily Value of that man‟s Labouring

Power”(“Wage, Price, and Profit,” 1968:209). In this case, no surplus value or

surplus produce would go to the capitalist in the first six hours of a day of work.

Because the capitalist pays the worker for the twelve-hour-day of work and because

the labour would get another 3s for the other six hours, then the surplus value or the

surplus produce equivalent to 3s that is realized in another six hours of work will go

to the Capitalist (Karl Marx, “Wage, Price, and Profit,” 1968:211).

When, according to Marx, “even the unpaid labour seems to be paid labour”

for the total aggregate labour of twelve hours of work, there is then the “false

appearance” of paid labour (Ibid). In reality, Marx explains that unpaid portion of

labour “constitutes exactly the fund out of which surplus value or profit is formed.”


Thus, Marx concludes that “The rate of surplus value… will depend on the proportion

between that part of the working day necessary to produce the value of the labouring

power and the surplus time on surplus labour performed for the capitalist” (Karl

Marx, “Wage, Price, and Profit,” 1968:210). Since as to profit “there is no law which

determines their minimum,” we can only say that “the maximum profit correspond to

the physical minimum of wages.” Finally, Marx sees the continuing struggle between

“the capitalist tending constantly to reduce wages to their physical minimum, and to

extend the working day its physical maximum, while the working men constantly

presses in the opposite direction” (Karl Marx, “Wages, Price, and Profit,” 1968:223).

Such is the source of an evolving contradiction which workers will fight it out for their

own liberation from surplus exploitation.

Karl Marx came up with the conclusion toward proposing the following

resolution:

1. “A general rise in the rate of wages would result in a fall of the general rate of

profit, but, broadly speaking, not affect the prices of commodities;”

2. “The general tendency of the capitalist production is not to raise, but to sink

the average standard of wages;” and

3. “Trade Unions work well as centers of resistance against the encroachments

of capital, … using their organized forces as a lever for the final emancipation

of the working class, that is to say, the ultimate abolition of wage system”

(Karl Marx, “Wages, Price, and Profit,” 1968:225) — a prediction that has not

taken place in modern — day advance capitalist countries.


This conclusion tells us that the first prediction has led rich countries to export

capital by colonizing other countries and exploit them. The second prediction may

have failed in advanced countries but true in the Third World economies, and the

third prediction is a true and false reality. It is true because Trade Unions manage to

improve the share of the labour created surplus value; this results in the falling rate

of profit in modern capitalist countries; it is false because Trade Unions have never

successfully removed the wage system. What is more true is that according to Marx

the improved living conditions of workers in the rich countries is the cost of worker

starvation in the imperialized countries. And this starvation may be worsened when,

as Marx predicted in his Notes on Machines, the Capitalist will apply high technology

and science for mass production; few workers are absorbed as mere button

regulators while many are thrown out of jobs (Fisher, 1970:106,fn).

The whole intellectual exercise accounts for the broad stroke of Marx‟s

general theory and the science of it. My next task is to account for the mass

“pauperization” in the Philippine social formation.


PHILIPPINE SOCIAL FORMATION

Introduction

The Philippine social formation has its historical origin in communal times,

i.e., before the conquest, when the community owns the basic tools of production

and when production for “use value” was still the collective endeavor (Agoncillo,

1990:22). The chieftain had to produce his own food, clothing and shelter. This

system was transformed into a feudal structure with the introduction of the

encomiendas by the Spanish colonizers, and at the same time were made to produce

crops for exports through the Galleon trade. In some parts of the archipelago,

“serfdom” and surplus labor exploitation through corvee labor was applied on our

ancestors, to whom wealth extraction by exploitation and control by tyranny and

Spanish religious damnation were used to hold our fore-parents by their noses for

fear of banishment and physical extinction. Surplus labor and surplus product

sparked the long years of resistance from a “campaign for reforms” to rebellion and

revolts in many places, punctuated by the sharp contradiction as manifested in the

Philippine Revolution towards the end of 1800 (see Agoncillo, 1990).

Then came another imperial American occupation in the Island. The

encomiendas were converted into haciendas for large-scale economies of fruit

production, sugar cane and tobacco plantations or the production of other crops for

exports. All were produced for “exchange value,” as rice and corn lands were placed

in the hands of the few middle class under a tenant-landlord and patron-client

relations both for “use-value” and for “exchange value.” A civilian government was

instituted beginning in 1903 with William Howard Taft as the appointed first Governor


General of the Island. The aim of this Civil government was to maintain peace and

order, to collect taxes, and to exercise the power of eminent domain by the

application of the combined repressive organs of the state (such as the militarization

program of Gen. Otis, the promulgation and enforcement of the Sedition Law of 1901

and the Flag law of 1907, etc.) and by the adoption of the ideological-political state

apparatus of the state (such as the guarantees of individual freedoms, the concepts

of “benevolent assimilation,” democracy and electoral processes, the Payne Aldrich

Act of 1909, etc) in order to covertly produce and reproduce the existing relations of

production dominated by the American occupants.

A democratic-republican form of government based on the free-market

economic system was introduced through the Payne Aldrich Act (Free Trade Law), the

1935 Philippine Constitution, the Bell Trade Act of 1946, the Parity Rights Law, the

Laurel-Langley Agreement in 1954, the Macapagal Decontrol Law of 1962, the

Omnibus Investment Incentives Act for multiple tax exemptions granted to foreign

investors, the Import Liberalization Law, VAT, etc.). All these state organs were and

are designed to sustain the relations of production within the purview of the

American free-market framework, which nature, according to Marx, is to push wages

low to correspondingly raise profit for wealth accumulation. The process of capital

accumulation is aggressively pursued through “… the application of… science to

production” and force “the surplus labour of the masses (to) cease to be the

condition for the development of the general wealth….” [Karl Marx, Notes on

Machines in footnote of Ernst Fischer, 1970: 106). Together with the unregulated

flow of capital in and out of the country, the general capital accumulation in the

Philippines has resulted in the financial crisis of the 1980‟s and in the late 1990‟s.


Politico-Ideological Forms

Karl Marx describes the politico-ideological forms collectively as the

“Superstructure” or “an organ of domination” and “oppression of one class by

another” for “the creation of „order‟” (Marx, “Preface…,” p. 182; see also Lenin, 1932

and 1943, p.9). American Sociologist C.W. Mills describes it as the “Power-Elite”

structure which composes the “small groups of elites (who) control most of the

governmental decisions that influence national policies (and who come from)… the

heads of giant corporations, top officials in the government, and key military

personnel” [Mills, The Power Elite (1956) as summarized in J. Victor Baldridge, 1975:

263]. Below these major elites are their “intermediaries” or as Baldridge points out

the “middle-range elites” (e.g. Congressmen, local government officials, and lower

members of the military) who “…carry out the orders of the power elites” (p.263).

In political science terminology, they (the major and the intermediary elites)

are called the “Government (or) persons in governmental elite and non-elite roles”

who “exercise” legitimate power, authority and influence in order to carry out the

state functions (Reece Mc Gee, et al, 1971: 471-472). However, some powerful

business organizations found outside of the government elite roles carry out their

“distinctive interests which may or may not coincide with the tasks and functions of

formal government” by exercising their “illegitimate power, authority and influence on

persons in governmental elite and non elite roles” (Mc Gee, 1971:472). They use the

Government superstructure to intensify wealth accumulation.

We now can see how the Philippine “Superstructure” just exactly reflects what

Marx or Mills or Mc Gee has observed of the political processes during their times.

The composition of the Arroyo Government has shown that it is a composite of three


small groups of people who are Presidents and CEOs of big businesses in the

Philippines, top official of the government and key military personnel (see cabinet

members of the Philippines). They operate with the “middle-range elites” in Congress

who implement their decisions through the local government elites who comprise the

political machineries at the precinct level.

The present Secretary of the Department of Interior and Local Government

(DILG) was chair of Pacific Sunrise Int‟l. Holdings, Inc. and Chair of the Board of his

family business — North River Mount Ranch in Virginia, U.S.A. The Secretary of

Finance was Chairman and CEO of the Economic Forecasting Agency Think Tank, Inc.

and member of the powerful Makati Business Club.

The Secretary of the Department of Trade and Industry (DTI) was Top

Professional manager of Manufacturing Financial Services and Int‟l. Trade, Chief

Finance Officer (CFO) of the Ramcar Group, and Auditor of a giant accounting firm,

SGV and Co. The Press Secretary was consultant to the publisher and became editor-

in-chief of the Manila Bulletin. The secretary of the Department of Environment and

Natural Resources (DENR) was manager of Market Place Philippines and

Wunderworld Services, Inc. and founder of his own business, EPO Market Movers; he

has links with the World Bank for having been elected Chair of the Host Country

Committee by the General Assembly of the World Bank‟s Carbon Finance Unit in

2008 in Germany. The former Secretary of the Department of Public Works and

Highways (DPWH) established his own San Gerardo Green Meadows Realty

Corporation and became its President and CEO. The Chairman of the Commission on

Filipinos Overseas (CFO) bought the prestigious newspaper, The Manila Times and

organized many businesses related to printing, real-estate, farming, trading and


became a “big-time publishing” entrepreneur. “In 2002, he became Chairman of a

thrift bank."

The same Arroyo Government is ruled by a few people who come from top

officials in the government. President Arroyo was Vice-President who became

President by a “people power” elite brokers; imprisoned her political elite rival and

years later released “not guilty” as charged. The Secretary of the Department of

Foreign Affairs (DFA) was former President Aquino‟s Secretary of Budget and

Management (DBM). He was Chairman of the powerful Development Budget

Coordinating Committee (DBCC), member of the Monetary Board, and Chair of the

Cabinet Oversight Committee and International Security (COC-IS); he was a Senate

Majority Leader, too.

The last of the three small groups that comprises the Arroyo Government

comes from the Key elements of the military. A graduate of the prestigious Philippine

Military Academy (PMA), the present Executive Secretary was former METROCOM

Commanding Officer, former provincial police Chief, PNP Director General and later

became PNP Chief before he became the former Secretary of the Department of

Transportation and Communication [DOTC]. The Secretary of Energy was Chief of

Staff of the Armed Forces of the Philippines and became the Secretary of National

Defense, and the immediate past Executive Secretary. DPWH Secretary Hermogenes

E. Ebdane, Jr. is a retired General, a former National Security Adviser and a former

Chief of the Philippine National Police (PNP). Executive Secretary Eduardo Ramos

Ermita was former Deputy Chief of Staff of the Armed Forces of the Philippines, and

former Undersecretary of National Defense. They form a cohesive Elite


superstructure who may not necessarily conspire but act concertedly towards a

power bloc preservation.

We see that these elites circulate from one cabinet position to another with

some interlocking elite roles and with distinctive common interests which may or may

not coincide with the formal functions of governance. Together, they compose the

Arroyo Government Elite structure which makes national economic policies that. in

turn, shape the structure of the economy and the life of the people.

Among the “intermediary elites” in Congress, we have key people whose

distinctive interests are tied to logging and mining businesses, real-estate firms,

banking and finance, and big landed estates either as owners or scions of big land

owners in the provinces. Most of these interests are obstructing the realization of a

genuine comprehensive Land Reform Law in the Philippines. For instance, Business

World columnist Oscar Lagman, Jr. identified about nineteen major provincial

landowners who inhabit the lower House of Congress (Lagman, Business World,

March 30, 2010). With this powerful landed bloc in the Lower House, how is it

possible to legislate a genuine comprehensive land reform program that will

redistribute the source of their wealth accumulation in order to improve the income

of the farmers in their respective political subdivisions?

Others in the “middle-range elite roles” use their positions in the Lower House

of Congress to formulate laws that will secure access of their real-estate and banking

businesses‟ to government funds. According to UP economist Solita C. Monsod,

although the Constitution prohibits government-owned or controlled bank or financial

institution to extend “‟loan, guarantee, or other form of financial accommodation for

any business purposes… to the President… members of the Congress… or to any firm


or entity in which they have controlling interest, during their tenure,‟” real estate

companies owned by the former speaker of Congress were “given financial

accommodations by PAG IBIG, National House Mortgage Finance Corp., among

others, during Villar‟s term as representative from 1992 to 1998 to finance their

business purposes.” (Solita C. Monsod, Business World, Feb. 4, 2010).

According to Monsod, “Villar‟s bank, Capitol Bank, which he controls and in

which his wife is the chief executive officer, „received loans, financial

accommodations, and guarantees from the Bangko Sentral ng Pilipinas‟, also

between 1992 and the present (1998)” (Ibid). Furthermore, “Manuela Corp., a

housing and realty Corporation owned by the family of the wife of speaker Villar, was

granted loan of Php 1 billion by the SSS, with another Php 2 billion loan syndicated

with GSIS (for a total exposure by these two institutions to Manuela of Php 3 billion)

— an indirect financial accommodation…” (S.C. Monsod, Business World, February 4,

2010, p.4). The Speaker got all these accommodation despite violation of RA 6713

— Code of Conduct and Ethical Standards for Public Officials…” and RA 3019 — Anti-

Graft and Corrupt practices Act…” (Ibid,, p. S1/5). Villar was able to violate those

laws because he was able to enact and to incorporate “the recapitalization of the

National Home Mortgage and Finance Corporation‟” to the landmark Comprehensive

and Integrated Shelter Finance Act, RA 7855 and “‟the amendment to the Anti-Agra

Law to include housing investment‟” (Ibid.). Both laws provide financial and

economic guarantees or favors and advantages to real estate and bank owners by

members of the power elite structure in the Arroyo Government. This power block is

enough to confirm US President Woodrow Wilson‟s thesis in his book The New


Freedom that the combined captain of businesses are the captains of the state

apparatuses that „dominate” what Marx claims “one class by another.”

But immediately below the thin layers of state power structure is the country‟s

machine politics which compose the “private armies” and the LGU politicians

operating at the precinct, city, town and provincial levels; they are organized in what

Robert B. Stauffer calls “corporatist organization.” Political machines are operators of

power preservation of the superstructure at the village level of the country. These are

well maintained through patronage funds and well armed private armies nationwide.

Machine Politics

The term machine politics suggests a reliable and repetitive control of

barangay voters within a particular jurisdiction. The structure is hierarchically ordered

patterns of elite-voter relationships that suggest how material rewards and incentives

are distributed (Rivera,1985). Michael Johnston (1979) describes this relationship

as “a well ordered, smoothly working patron-client organization,” characterized by

factions in small groups of barangay and precinct leaders actively working for the

elite structure of the ruling class that “converts the products of public authority into

rewards for the faithful” (Ibid). In turn, these faithful groups turn out the votes and

other forms of political support to their patrons in the superstructure to legitimize

their positions in the central government. Thus, one notable feature of machine

politics, according to James Scott (December, 1965), is that it is “blatantly corrupt,

costly, and encourages petty graft, which, in turn, exemplifies the effects of machine

pressures in road building and other developmental schemes among developing

nations.”


The Philippine government is founded on the principles of republicanism and

democracy. Both principles demand accountability and the rule of law. Accountability

and the rule of law are twin mechanisms of democracy. Today, these principles are

at odds with the eco-political reality. The perceived corruption in the Superstructure

of governance involving high officials corresponds to the public perception of the

erosion of accountability in governance. For instance, the top thin layer of elites in

our society, which Sec. Romulo Neri describes as the “Filipino Oligarchs,” is involved

in multimillion graft and corruption at the average of “20% kickbacks on all

government projects,” according to the World Bank Study in 2000 and in SWS Survey

in 2004 (Business World, February 11, 2008). At 20% kickbacks on all projects, the

Makati Business Club estimated a “Php 30 billion leakage to graft and corruption” in

year 2008 (Business World, Feb. 11, 2008).

In regard to the rule of law, the present government puts together “Php 4

billion unauthorized spending authority broken down as follows: Pantawid Kuryente

Program Php 2 billion, Pantawid sa Edukasyon worth Php 1 billion and another Php 1

billion for loans available to public transport owners for engine conversion from

gasoline or diesel to LPG” from VAT (B. Diokno, Business World, June 18, 2008). Also

major projects such as Cyber Education Program, graft ridden National Broadband

Network, Southrail and Northrail projects were exempted from Republic Act 9184

(Government Procurement Act) and these big projects were placed outside of the law

(Business World, February 21, 2008). These soaring practices of graft and

corruption in “conspiracy” with foreign big business corporations, in addition to

placing major projects outside of Procurement Law processes are a mockery to

people‟s trust on the Philippine elite structure and law which only work for more


wealth accumulation of the dominating class against the mass-starving Filipino

households.

Political machines are also maintained by well armed private armies who

terrorize the countryside and ensure the required political support in terms of votes

that legitimize their seat in power. In 1993, The Economist, according to UP

Professor Solita Monsod, reported the police account of “ „562 private armies [that]

terrorize the countryside with almost 24,000 men and 11,000 guns‟ ” (Solita

Monsod, “Private Armies,” Business World, January 28, 2010). Monsod calculated

about “43 men per army.” Monsod writes that the police statistics “… would come

out to an average of more than three private armies for every city and province

existing at the time, and an average of about 43 men per army” (S.C. Monsod,

Business World, January 28, 2010). Although Monsod found Defense Secretary

Norberto Gonzalez‟ report of reduction in number of private armies from 562 to132

private militias with 10,000 men “mysterious,” the fact remains that the Philippine

National Police is one “”in agreeing that there are 170 private armies operating

across the country …” (Monsod, Business World, January 28, 2010 S1/4).

The Maguindanao massacre in November 2009 was the most bloody killing

ever inflicted against the 57 civilians and journalists by a well funded and well armed

private army which is working for the elites in the Philippine Superstructure. The

same militia was alleged to have engineered an electoral fraud that delivered an

almost 100% Maguindanao votes to President Arroyo against Fernando Poe Jr. in the

2004 Presidential election. This incident reflects not only how powerful political

machineries are in the country, it also shows how deep and expensive does the

superstructure maintain itself up to the barangay level. These political machineries


do not only “encourage petty graft” which, in turn, exert “pressure on road building

and other developmental schemes” such as the fertilizer program to boast

agricultural productivity, it is also an institutional expression of the superstructure to

preserve itself via the preservation of the existing relations of production in the

economic base.

The Philippine Economy and Financial Crisis

Basically, the Philippine economy is a product of American direct and indirect

colonial administration. This economic structure was historically intended to convert

the Filipino economy into the “backyard garden” of the American economy for a

perpetual source of “surplus value.” As a “periphery,” the Philippine economy suffers

from three major American colonial strategies for its “persistent under-development”:

(a) “exploitation of the periphery by the core,” (b) “structural distortion,” and (c)

“suppression of autonomous policies” (Chase-Dunn,1975:722-724; Theotonio Dos

Santos, 1970). These strategies sustain the American “surplus value extraction”

from the Philippines through foreign investment and thus create the condition for

what Gunnar Myrdal calls the “backwash effect” in the Philippines that leads to what

Gunder Frank calls the “development of underdevelopment” (see Dunn, 1975:722).

Suppression of autonomous policies. The first act of American colonization

and neo-colonization to subordinate the Philippine economy into a source of

American wealth accumulation is the “suppression of autonomous policies” in

government and business to prevent them from mobilizing their resources towards

what Johnson (1972) calls a “balanced development” (Dunn, 1975:724). The

Howard Taft Civil Government was instituted to prepare for the neo-colonization of


the Philippines through which the U.S. Government can rule the natives through the

Filipino “elite proxies” in the Civilian Government. Sedition Law and Flag Law were

promulgated in 1907 to check on autonomous movement in the country; the Payne

Aldrich Act was also introduced in 1909 and the Bell Trade Act in 1946 to

indoctrinate the local elites into free-trade and “politically prevent the introduction of

tariffs which would protect infant industries against the competition of already

developed producers in the (U.S.)” (Dunn, 1975:724). Floating rate policy binds the

peso to the US dollar in 1950, beginning with the exchange rate of $1.00: Php 2.00

(Lichauco, 1988: 162). President Diosdado Macapagal introduced the Decontrol

Law in exchange for a $300 M dollar loan from the U.S. and the IMF-World bank

group to “… remove the system of control … involving the use of foreign currency”

such as import transactions, royalty payments, remittances of profits, earnings and

dividends by foreign companies from their Philippine operations…” (Lichauco, 1988:

140). Through the “Decontrol Law,” the nation lost US $ 1B in trade deficit and

another US $ 1B in capital flight, or a total decapitalization of US $ 2B in just one

year of implementation (Lichauco, 1974: 24).

Together with the Foreign exchange policy, the Decontrol Law that

decapitalizes the Philippines provides the ground for peso devaluation in favor of the

US dollar through the policy of “floating rate.” This devaluation increases our foreign

borrowing without necessarily obtaining the actual loan. The Manila Times (May 29,

1989) demonstrates the raw truth of devaluation, according to the NMCL Bulletin

(v.2, n. 23, 1989):

Assuming our foreign debt is $27.8B, our debt burden will increase

by Php 278M for every centavo devaluation of the peso. In terms of

export, “we must export Php 278M more worth of goods to pay the

old amount in dollars to cover Php 0.01 devaluation.”


This debt burden and our Decontrol Law that spirals decapitalization of the economy

devalues our peso further to prevent the nation from industrializing.

The clear post World War II mandate to convert the Philippines into a

“peripheral area” of the American economy — that manifests intention to suppress

autonomous policies in the Philippine — started with what 1973 Constitution

delegate Alejandro Lichauco describes as the “conspiracy between elements in

Washington power structure and elements in Philippine society which pass

themselves off as the „nation‟s elite‟ “ (Lichauco, Today, July 23, 2001). The

“conspiracy” has its origin to the post-war “Dodds Report which then President

Truman approved as a basis for America‟s post-war policy in Asia” (Lichauco, Today,

July 23, 2001). Citing 1935 and 1971 Constitutional Convention member, Dr.

Salvador Araneta, Lichauco asserts that “the strategic concept of the Dodds Report

was „to make Japan the industrial workshop of Asia and the Philippines a mere

supplier at raw materials‟ “ (Lichauco, Today, July 23, 2001). Clearly, the U.S.

Government allowed Japan to pursue an autonomous industrial program in

accordance with the Report, making Japan an American ally in Asia, while the U.S.

Government Suppressed the Philippine autonomous policies and nationalist

industrial programs in order to force the Philippines to specialize in agriculture and

the production of raw materials for exports. This U.S. effort to suppress the

Philippine nationalist policies became the foundation of structural distortion, too.

Structural distortion. Samir Amin (1974) describes structural distortion as an

obstacle to national development (Dunn, 1975:723). It is characterized by an

outward oriented economy whereby the “peripheral area” such as the Philippines is

reduced to a mere exporter of raw materials while the “core”” such as Japan and


America are designated as the “workshop for industrialization.” Such vision was well

articulated by Albert J. Beveridge on January 4, 1900 in the American Senate when

he argued:

“The riches of the Philippines have hardly been touched by the

finger tips of modern method. And they produce what we consume,

and consume what we produce — the very predestination of

reciprocity — a reciprocity not made with hands, eternal in the

heavens.”

“They sell hemp, sugar, coconuts, fruits of the tropics, timbers of

price like mahogany; they buy flour, clothing, tools implements,

machinery and all that we can raise and make. Their trade will be

ours in time” (Reproduced in Bourstin, An American Primer,” New

American Library,1966, quoted by Lichauco, Towards A New

Economic Order and The Conquest of Mass Poverty, July 4,

1986:38).

This vision of core-periphery relationship between the U.S.A. and the

Philippines was later on tied to the Payne-Aldrich Act of 1909 known as the Free

Trade Law. This was enacted by the U.S. Congress in 1909 and “was made the basis

of Philippine-American economic relations (Lichauco, 1986:40). The U.S. Congress

enacted on the eve of Philippine Independence the Bell Trade Act of 1946 which

“required the Philippines to continue and extend the Free Trade relation in exchange

for post-war financial and economic assistance from the U.S. government” (Ibid., p.

41 underscoring mine). The Bell Trade Act then “condemned the Philippines,”

according to political economist Salvador Araneta, “to a „colonial economy‟” (Ibid).

To ensure the vision for structural distortion in the Philippines, U.S.

Government and the IMF-WB Group enticed then President Diosdado Macapagal with

a “stabilization loan of $300 million in exchange” for the Government‟s submission”

to the IMF Charter prohibiting the application of controls on imports and all foreign

exchange transactions” (Ibid., p.42). President Macapagal formalized this

“submission” to Free Trade in his Decontrol Program of 1962. Lichauco points out


that “under the program we (are) required to eliminate the system of import and

foreign exchange controls which had been in force during the period 1950-1961”

(Ibid., p.42). The Decontrol program then, according to political economist Lichauco,

“… not only reiterated Philippine commitment to a policy of unrestricted importations

but also marked the beginning of the IMF‟s direct involvement in our policy

processes, and the rise of a Filipino technocratic class which would defend and

speak for IMF sponsored programmes” (Lichauco, 1986:42). The condemnation of

the Philippine economy to currency devaluation and the adoption of the floating rate”

in 1969 would make progressively cheaper for foreign investments to buy into the

Philippine economy (Ibid., p.43). According to Lichauco (1986:44-47) “the Labor-

Intensive Export-Oriented development strategy of the Martial Law Government,” our

accession to membership in the GATT, the “Virata 1976 Letter of Commitment to the

IMF as a means of protecting domestic industries” already completed the American

design for structural distortion to prevent the Philippines from developing an

integrated differentiated internal structures to advance the country into becoming

the “workshop of Industrialization.” Under this structural arrangements and policy re-

orientation towards the world market, highly industrialized countries now enjoy

unrestrained exploitation of surplus value from the Philippines. Infrastructure

projects, railways, electrification, processing zones, including tax exemptions are

placed in areas were foreign investments are located so that other sectors in the

economy are never integrated evenly for internal development.

Suppression of autonomous policies. Karl Marx posits another thesis saying

that “… in assessing the situation of workers it was necessary to consider the market

as a whole and that wages of some could rise only because others were starving


(Ernst Fisher, 1993:124). In a globalized context, Marx still sees the uneven

development among workers through what Emmanuel (1972) calls the “unequal

exchange” of commodities between countries, considering that the two countries

have two different wage structures (Dunn, !975: 722). Another basic argument in

Marx‟s thinking is posited in Frank‟s (1969) thought which holds that “… foreign

investments drain surplus from the periphery (i.e., the Philippines) to the core (i.e.,

U.S.A., Japan, etc.) through the repatriation of profits and interests” (Dunn,

1975:722). The effect is decapitalization in the periphery. In a global context then,

the Philippines is suffering from “exploitation by the core” countries, and with it, as

Marx claims, the rise of wages among workers in the advanced countries

corresponds to starvation in others.

In the Philippines, Edberto Villegas (rev. ed 1983:8-21) documented some

growth of investments since 1946. And what goes with it is the increasing

decapitalization. According to this study, there are 743 fully foreign owned

corporations in the Philippines; they are “incorporated abroad but acquired licenses

here:” 244 were established between 1967 and 1977: of the 244, 144 entered

during martial law (Villegas, 1983:9). Again Villegas (1983) noted in his study that

there are 3,840 domestic corporations registered in SEC since 1946 but 63 percent

of them were incorporated during martial law years. Although Villegas noted that

these companies “have foreign equity, many are 100 percent foreign owned and/or

affiliates of multinational companies (Ibid.).

The U.P. Law Center claims that “for every dollar directly invested by American

corporations in the Philippines from 1946 to 1976, the net profit was $3.58” (R.

Constantino. 1979:38 underscoring mine). The same document discloses that of


this net profit, $2.00 was repatriated to the home country and $1.58 (is) reinvested

here” (Ibid.). Thus, Constantino concludes that “foreign investors take out more

dollars than they bring through repatriation of profits” so that “during the 30 years

period, U.S. firms „decapitalized‟ the Philippines by $398 million” (Ibid.). In terms of

local use of capital, Villegas cited the Limjoco paper showing that foreign companies

borrowed $100.00 from local commercial banks for every $0.41 they brought into

the country (Villegas, 1983:9). Citing Central Bank Department of Economic

Research(l976), his documentation also shows that from 1972 to 1976, direct

foreign investment had brought into the country a total of $485.1 million but local

borrowing of foreign investors for the same period amounted to $12,433.42 or at a

borrowing ratio of $1.00 is to $25.00 (Villegas,1983). In terms of direct withdrawal of

capital covering profits, earnings and dividends (PED), foreign companies had

repatriated a total of $483.43 million (consisting of $313.26 in PED and $170.12 in

withdrawals from foreign investment between 1972 and 1976 (Ibid., p.10). Thus,

within a period of five years, foreign companies had decapitalized the Philippines by

a total of $483.43 million.

In a globalized context, foreign investment penetration in the Philippine

economy through the free-trade arrangement has drained surplus value from the

Philippines expressed in hard dollars of foreign exchange capital. For example, UP

Law Center‟s Merlin Magallona argued that Philippine trade policy is a “hemorrhaging

policy” (Magallona, Daily Globe, May 29, 1992:5). Citing the UN International Trade

Statistical Yearbook (1991, vol.1). Magallona showed that the Philippines had

incurred an “unbroken trade deficit from 1975 to1989” (Ibid.). In five years then,


average Philippine annual decapitalization in trade deficits amounted to $1,900

billion for the period.

The country‟s option for agriculture and export oriented economy therefore

made the Philippines economically backward, experiencing what dependency

theorists call the “suppression of autonomous policies,” “structural distortion,” and

“surplus-draining from the periphery to the core.

Furthermore, the Philippines has been experiencing the “hidden exploitation

in the prices at which commodities from the periphery (i.e., Philippines) are

exchanged for commodities from the core (i.e., the U.S. and Japan, for example)

[Dunn, 1975:722]. In the absence of current data, and if we use the U.S.

Congressional Record of November 9,1973 as cited in Renato Constantino(1979:29)

for purposes of estimation, this “unequal exchange” becomes visible if we trade Del

Monte Canned products from Hawaii with the Del Monte Canned products in the

Philippines. The Report shows:

While Hawaiian plantation workers earn $2.64 an hour, Del Monte

pays its Philippine plantation workers 15 cents an hour. Hawaiian

cannery workers get paid $2.69 an hour compared to the 20 cents

an hour Del Monte pays Philippine workers for the same job (see R.

Constantino, 1979:29).

The data show that according to Marx‟s concept of surplus value, the cost of

necessary labor time spent in the production of a canned product in Hawaii, as

expressed in U.S. dollars, is $5.33 while the necessary labor time spent in the

production of the same canned product in the Philippines is only 35 cents. If these

two commodities are traded in this “unequal exchange” process, Del Monte has

extracted $4.98 more in surplus value from the Filipino worker on a per hour basis


compared to Del Monte‟s surplus value extraction from the Hawaiian workers in the

same unit of time.

In other words, by transferring the American Capital from Hawaii to the

Philippines, Del Monte is able to rake tremendous profits per hour on a per unit of

labor power spent in production compared to retaining their capital in Hawaii at the

cost of experiencing what Marx calls the fate of the “falling rate of profit.” In this

sense, according to Marx, the relatively high wage cost for a Hawaii worker is a

function of starvation of a Filipino worker on a per hour basis in the same production

process. Hence, in a globalized setting, the situations of labor between the two

modes of production are different: while the mode of production in the core

countries can offer better wages to its worker on a per hour basis, the mode of

production in the periphery provides starvation wages on a per hour basis. Finally,

under this unequal exchange, there is an evolving sharp contradiction growing in

capitalism, and this contradiction is getting catastrophic as shown in the financial

melt-down being experienced in the U.S. and in the European Union. The debt-trap

experience in Greece and maybe in Portugal has become increasingly catastrophic,

unless a Marxist fiscal approach through state intervention is used to pump-prime

the Greek economy in order to mitigate the fiscal crisis.

Free Trade and Financial Crisis

Free Trade and Floating Rate policies are twin Ideological State Apparatuses

instituted by the U.S. Government in the Philippine Superstructure through the

mechanisms of colonization, bilateral arrangements, missions, and the assistance of

Filipino western-oriented technocrats and academics. As political-legal expressions,


they shape the Philippine mode of production into an open, export-oriented economy

dominated by the U.S. transnational companies.

The Philippines had its own import and exchange control of the 1950‟s.

Imports were banned to protect the local industries and we produced for internal

consumption (Former Deputy Labor Secretary Amado Inciong, Today, August 25,

2001). Employment opportunities expanded as businesses and enterprises began to

flourish. The Philippines then experienced the development of “new industrial

enterprises” (Letezia R. Constantino, 1984:1). Constantino writes:

By 1960, Filipino businessmen were doing well in food, wood,

pharmaceutical, cement, flour, textile, paint, paper, glass, chemical,

fertilizer, appliances, electronics, plastic, fuel refinery, intermediate

steel, ship-building, motor vehicle, machine parts, engineering and

other industries. We were starting our own modest industrialization.

Even though some of these industries were only assembly plants for

imported parts, at least the ownership was Filipino and it was a

good beginning.

Efforts to establish an industrial steel in the Philippines were made. President

Macapagal and his economic team exerted efforts to “actively assist the Jacinto

family in putting up (the Integrated steel mill) successfully” by “obtaining a loan of

$62.3 million from the Exlm Bank (of the U.S.)” [Lichauco, Today, August 28, 2004].

However, Pres. Macapagal sensed some forces (notably the U.S. government in

collaboration with the American educated and western-oriented Filipino economists)

who work for the derailment of the project (Ibid.).

By 1962, the Macapagal Administration was led into signing the Decontrol

Law which crumbled the protective measures instituted in the 1950s. Previous

foreign exchanged capital freely moved out of the country at will which, in one year of

Decontrol of decapitalize the country by over $2 billion deficits and capital flights

representing “profit remittances, capital withdrawals, and investments by Filipino


overseas” (Lichauco, 1973:23-24). The Minimum Wage Law also collapsed by then.

Former Deputy Labor Sec. Inciong correctly said it: “The political, economic and social

reality in which the minimum wage law worked began crumbling in 1962” (Amado

Inciong, Today, August 25, 2001). The Decontrol program flooded the country with

cheap imported goods and destroyed our local industries and thrown workers out of

jobs.

At any rate the first Filipino financial crisis was set in motion when trade

deficits and continuing unrestricted capital flight began to play with the Decontrol

program. It also started to drive the Filipinos into the phenomenon of mass-hunger,

which became really the drive “behind the fiscal debt-crisis in the Philippines”

Lichauco, Today, August 27, 2004).

The Structures for converting the Philippine economy into “outward” looking

was engineered by the U.S. Ranis Mission headed by Yale University Professor

Gustav Ranis during the early 1970s. Ranis then provided “the ideological base to

the export-oriented development strategy” and the hidden philosophy of Filipino

mass-hunger that went with it. In 1969, the Philippine government suffered another

“foreign exchange crisis” (Financial Crisis) which started with an IMF loan of $300

million in exchange for the Decontrol Law; three years after the Decontrol, foreign

debt doubled to $600 million (Lichauco, 1986:42). Today our foreign debt amounts

to Php 443 trillion equivalent to US $8.6 billion. This spiraling national debt has been

used to stabilize the country‟s economy due to massive decapitalization and capital

flight. This paves the way to floating the Philippine currency with the U.S. dollar. The

“Floating Rate” policy finally devalued the peso as well as provided the condition for

dismantling the once flourishing Philippine industries. Job opportunities for the


Filipino workers collapsed and delivered them out of jobs. Importation of capital and

consumption goods took over and thus provide more job opportunities to the workers

in the industrialized nations.

By 1995, the Philippines entered into full globalization when President Fidel V.

Ramos followed or acceded to the World Trade Organization for “a miracle” — a

dream for a miracle that “turned out to be a bubble blown into Smithereens by the

globalization-driven Asian economic crisis of 1997” (Amado Inciong, August 25,

2001). Clearly now, the Philippine financial crisis is driven by the Payne Aldrich Act

Free Trade of 1909, the Bell Trade Act of 1946, the Dodd Report of the 1950s,

President Macapagal‟s Decontrol program of 1962, President Marcos‟ Ranis ideology

of export-oriented economy of the 1970s, Virata‟s IMF driven “Floating Rate” and

Devaluation, and then by Ramos and Arroyo‟s full globalization scheme.

All these programs of economic deregulation being institutionalized in the

Philippine Superstructure dismantled the Philippine nationalist protective economic

programs that once induced the Philippines to industrialization for job opportunities

expansion and internal consumption first. They transform the Philippine economy

into an export oriented system through liberalization that “lets transnational giants,

together with their capital goods, in and out of our economy at will; deregulating of

the economy (that) inhibits our government from regulating businesses in the public

interest; and privatization limiting the ownership, control and operation of businesses

to the private sector … dominated by transnational giants” (Inciong, August 25,

2001) at the expense of creating the conditions for backwardness and mass-hunger

in the Philippines.


SOCIAL FORMATION: BACKWARDNESS, ECONOMIC SLOWDOWN AND MASS -

HUNGER: CONCLUDING REMARKS

Karl Marx‟s General Theory of Social Formation offers a comprehensive

theoretical guide to analyze social systems. This perspective offers a horizon through

which the invisible structure of capitalist system is unfolded from behind the visible

relations. This is consistent with Marx‟s scientific approach demanding distinction

between “the appearance of things and their essence.” As a theory of social system,

Marx saw two irreducible structures: the politico-ideological Superstructures and the

economic base on which the former arises. Although Marx and Engels assert that the

Superstructure influences the forms in the economic base, ultimately the

infrastructure is decisive. For Marx and Engels, all consciousness or ideological

forms, which they said cannot be measured by the precision of the natural science,

and through which we become aware of the ongoing contradiction in the economic

base, are “determined” by the latter — the economic base which can be measured by

the precision of science. This consciousness, according to Marx, must be “explained

from the contradictions of material life: ((M.B. Brown, p.126). Change taking place in

the economic base more or less transforms the whole immense Superstructure.

In the Philippines, the mode of production is a product of colonial impositions

that turns it from a protective inward looking economy producing for consumption

into an open, export-oriented economy dominated by transnational companies. Free

Trade, Floating Rate, Devaluation of Philippine Currency, IMF-Investigated Value

Added Tax, Import-liberalization and economic deregulation, Investment Incentives

Act which hoped for a miracle and turned this hope into economic backwardness,

serious financial crises, joblessness and mass-hunger are ideological legal forms in


the Superstructure. In the sense of Marx, the economic contradiction of the forces

and the relations of production in the economic base explain the entire immense

political- ideological forms, which, in turn, are nothing but legal expressions of the

productive forces in the Philippine Mode of production. In the context of globalization,

the Philippine economic backwardness explains the situation of Filipino workers in

mass-hunger only because workers in the core countries enjoy the luxury of high

wages. According to Marx, “the wages of some (i.e., workers in rich countries) could

rise only because others (Filipino workers) were starving” (Ernst Fischer, 1973:124).

Backwardness and Mass Hunger

There are a number of socio-economic and political challenges burning right

under our noses. The most basic of these challenges is our incapacity to produce the

most basic tools in order to carry out even the most ordinary economic activities in

the country such as gardening, sewing, making of bolts and nuts, wire brushes, wood

screws, electrical wiring accessories, electrical light fittings, plumbing accessories

and fittings, or even leather footwear, and etc. In other words, we failed our country

to industrialize and our policies have opted to pursue “import liberalization” and

“export agriculture” which enable giant multinational companies, cronies in sugar,

coconut and bananas to “extract billions of pesos from Philippine export agriculture”

(PDI, April 29, 1995:4) and take the path of impoverished economies of an agrarian

society. Nobel prize winner — Gunnar Myrdal — had described this situation in his

book Asian Drama as the phenomenon of “backwardness.” The abysmal failure of

our program for poverty reduction speaks well of our economic “backwardness”

where, according to the FNRI-DOST research report on November 2, 2003 issue of


Today, “8 out of 10 households are hungry” and this translates to 80% of our Filipino

households who are suffering from mass hunger. This poverty condition has

worsened as a consequence of the present crisis. Cielito Habito describes this crisis

as “slowing economies” of surging prices and slowing down of production and job

growth (Cielitio Habito, Philippine Daily Inquirer, June 8, 2008). In April this year the

government reported” some 2.9 million Filipinos (who) found themselves jobless.”

Our unemployment rate of 8% this year compared to last year‟s 7.4% (Business

World, June 18, 2008:1) indicates an increase in mass hunger. This tradition of

mass hunger signals the real “backwardness” of our Philippine Economy.

In the Philippines, we failed to consider these hard facts of patriotism to

protect our domestic market and instead embraced the free-market system since

1909 through 1962. And it is this free market system and economic deregulation

that created the recurrent economic “slowing down” and mass hunger throughout

the land: the serious capital flight in 1963, the economic slowdown during the

Marcos era, the 1992 economic and political uncertainties, the Asian Crisis in 1998

(which hit the Philippine economy), the Philippine “fiscal-debt crisis” in 2004, and

economic slow down, political disorder and safety in 2008.

Slowing Economies and Mass Hunger

The economic uncertainties and mass-hunger brought about by the slowing

economies are consequences of “surging prices, production and jobs growth”

(Habito, PDI, June 8, 2008). At the base of these uncertainties is our backwardness,

because even before this economic crisis, mass-hunger had already recurred in the


country. Economic slow down has only worsened the phenomenon of mass-hunger in

the Philippines.

The possibility of double-digit-inflation rates force consumer purchases of

goods and services to slow down and thus immobilize the single biggest impetus —

consisting of 70% of total demand — for production in the economy (Habito, PDI, June

8, 2008; B. Diokno, Business World, June 4, 2008:4). Inflation rate drivers such as

oil price hike and higher food prices remain unabated and these drivers pressure

inflation rates to go up in the coming year. In April, 2008, food inflation statistics was

recorded at 12% and rice inflation of 25% (Business World, May, 2008). Thus, our

almost unbroken trade deficits in the past 25 years (NSO), our „waning

competitiveness of exports,” and the BSP‟s failure in “taming inflation” make the

Philippines “most vulnerable economy in Asia, next to Vietnam, “according HSBC‟S

Chief economist (Business World, June 27-28, 2008).

The Philippine economy has been dependent on the American economy for

years. Contrary to expectations of government authorities for a quick turn around in

the economy with higher growth, higher inflation rates will still be with us (M. Teves,

Business World, June 17, 2008) for another year, as “U.S. economy likely won‟t

improve until summer 2009, with more layoffs and higher inflation looming…”

(CNNMoney.com, “Economic rebound at least a year away”). As inflation rates go up,

workers will likely press for higher wages and, in turn, businesses cannot resist the

demand for another wage hike. Higher production costs follow and force businesses

to cutbacks in both their outputs and workforce (Habito, PDI, June 8, 2008). Cutting

the business work force increases mass-layoffs and mass-hunger.


This leads to another economic problem — high interest rates. As inflation

rates increase, the Bangko Sentral responds by “tightening money supply and raising

interest rates” so that investments are curtailed and production growth dampened

(Habito, PDI, June 8, 2008). The ultimate recipients of these three “downside risks”

are the ordinary people who have nothing to fill in their turbulent, empty stomachs.

This economic situation has led to the growing “pessimism” among the Filipinos. The

SWS Survey showed that 23% are pessimistic that their “personal quality of life

would get worse, a plunge from 16% previously,” while “pessimism about the

Philippine economy… worsened to 45% from 37% previously… (Business World, June

10, 2008:1). The economic slow down and the people‟s pessimism on the ability of

the government to provide livelihood services to improve their quality of life put

pressures on the environment. The people tend to over exploit the environment

because of the country‟s paucity of livelihood opportunities.

Our economic backwardness, financial crisis, slowing economies and mass-

hunger are manifestations of catastrophic contradiction of the Philippine material life

process. While they express the consequences of politico-ideological and legal

expressions in the Philippine economic base, the opening of the Philippine economy

to foreign investment, as well as containing the development of our industrial

capability through free made, export-oriented and floating the Philippine currency to

the US dollar will continue to devalue the peso only to increase the wages of workers

in the “core” countries. Our Filipino workers are thrown out of jobs and to suffer

mass-hunger along with the death of our industries. Therefore, our leaders‟

shortsightedness and lack of patriotism to resist western politico-ideological and


legal impositions have brought us into this social formation sitting on a catastrophic

contradiction.

33rd Phavisminda.karl Marx's Social Formation - r.y. Rivera

Documents

theotonio

bell trade

payne aldrich

repressive

philippine

marxs social

philippine

key military